tv Money Moves With Deirdre Bolton Bloomberg December 30, 2013 2:00pm-3:01pm EST
be the car of the year for 2013. such an amazing breakthrough for general motors. it is hard to pick any other car as number one. >> thank you so much. good list. we will be on the markets in 30 minutes. money moves is next. ♪ to," --moves welcome welcome to "money moves." activist shareholders of been active this year. we will show you apple as a key study and what may come in 2014.
how angel investors and venture capitalists may exit in the new year. first up, a focus on hedge funds. the s&p 500 year to date have aances happening -- shift from stocks. one of the biggest beneficiaries of money -- money moving from bonds to venture driven funds that have wall stocks in them, right? >> institutional managers think that the bond rally that we have seen is coming to an end, so they are reallocating potentially more money to event driven strategies like polson. the numbers really tell the story here. if you look at the first nine months of the year, equity and event driven strategies gained about what a billion dollars in -- in that was a school where its relative file you funds in about $21 billion.
that is a really big conference from 2002 when you saw a huge amount of money going in, and and a loss about money coming out of the equity funds to the tune of $70 billion. that point to a real turnaround here in the way that investors are thinking about how to allocate. >> when you think of allocations, which funds are betting -- benefiting the most? let's stick to john, because he is a about $500 million from a firm called guy bridge capital. they allocate their client's money to third-party managers. that is being split into two places among paulson's funds. one is the recovery fund that really bets on this economic recovery, the other one is that strategy. both of those funds have posted today good returns this year.
five percent and 28% relatively speaking. even more money for paulson by helping them recoup a lot of those losses that he had on the euro and gold. >> thank you. with thealesci there very latest on this shrift in strategy, and what it means for hedge funds specifically, john paulson. venture investors have been seeking out a bit going -- bi tcoin related strategies. all, what is unique about poinsettia -- coin center? >> it is basically an exchange rate can pull together multiple istcoin prices as it currently kind of like the wild west. uber goal of that together and you bring in other analytics
about the market, and it allows you to open up an account, and you can use all of that information to make trades, sort of like a foreign-exchange platform. >> we know that they're rushing to get into bitcoin related companies. how are written -- under capitalist evaluating the return on their investment? >> if you're betting on something in this universe you are betting that they will be around in a capacity for a while, and that it will be a way that the money gets exchanged. the primary way they are hedging the risk is they are not actually betting on the increase in the value of bitcoins themselves. it is just that they are going to be around them and you will be the ecosystem around it. whether that is a trading platform, analytics. he given as the mobile operating system. the android or the ios, that is the center of the technology. what makes a really valuable as all the places where you store
documents command where you exchange photos abide where there is security. so that is the kind of thing you're seeing being built around bitcvooin right now. ,> we know the value of bitcoin such volatility. they're making a bet that it exists in some form, but this volatility is pretty extreme. the steep decline in the bitcoin would be that -- retail investors if there's a much volatility in the price that people are scared of except it, then you lose a lot of the potential transactions. that is where the potential risk as well short and long-term. >> thank you, as always.
andvery latest on bitcoin, what it means to venture capitalists. we stay with tech, but we bring it east coast. the marketing direct your and my special guest host this hour, so glad you're keeping me company. >> thank you for having me. accredited investors, you talked about the cost of creating a company is certainly going down the but the price for talent is going way up. other so few superstars out there in technology? >> yes there are so few superstars and ecology, the researcher costs have gone down, but it is execution. having the team that can execute on these big ideas is really almost priceless to the point that recruiting has become
incredibly fierce. >> you have some stats on this, from what you see, how intense is the competition? ande surveyed our startups, out of the responses that we got, one in four use 60% or more of the funds of that they raise to hire people and for salaries. >> that means that companies are a pretty strong incentive to go out and raise capital. it connected the people on board until he do, that makes you talk to angel investors and take these example more seriously. >> it is also the talent that they are going after. they would actually higher someone with greater experience and higher salary than to junior -- two junior executives with lower salary. is that first 10 a mess -- m
yth. >> a myth, but easier to get your founding team, as they are the first people you have known for years. carter, the ceo of gain closure just compared to be this past weekend to it being like regarding for professional sports teams. i am got up any percent on their salaries in the past five years. programmers, or whom? who is getting the lion's share of the money? >> it is for really great confident marketers, business development people that know how to take a very nascent idea of giving credibility within the market is tying to disrupt -- it is trying to disrupt. >> you need a little bit of experience, but at this better
-- but even a little. experience is better than someone totally green. >> 35% of the hires got no equity whatsoever. >> if the company gets bought, they get nothing? >> correct. pool ofs there is a common shares that are just riveted to the staff, but walking in the door, they get paid close to market salary, and i can equity. all part of the decision of whether this job is right for you. starting of comedies let's -- expensive to start for structure wise, it does mean that the investment side, the angels, super angels, they have to go smaller, they have to go larger in their pool, and also
younger. >> correct. but that does not mean that it now that the funding sizes are smaller. observed a four percent to six percent increase in the seed sizes in the past year. the largest was ever raised this $25 million, and that is to be able to hire a get through to the series a. wholespeaks to this ecosystem and the whole asset class of more more people being interested in investing in technology, even when they have not necessarily -- there are hedge fund managers asking where i can invest in technology with their own private funds. >> there has been a rush to the early stage, so one of the things about the seed fund
increasing is that there is more seed one degrees e, there's not that increase downstream which means that series a and series b funding, you really have to have shown serious traction for that to happen. >> the series a crunch. we will have more with justin on the tech scene here in new york. we're also going to bring you more details from blackstone, to privately at -- private equity investments announced this morning. ♪
diversify their portfolio. at crocs current ceo will be retiring at the end of april. also in private equity you have gradediscount furniture the ceo teddy this will continue to lead the company by the deal is seen closing by the first quarter of 2014. the more on the implications of these had lines that headlines we are going to bring in our area experts. two retaill, stories. this is a familiar private equity theme. >> this is the second retail deal for bain just this month. they agreed to buy canada goose. big yeartually been a for retail, cyclical targets for
private equity are up 25% this year. they are seeing some runway for discretionary spending to pick up out of the recession. it one of the biggest heels in my book was the neiman marcus markets one, a secondary deal. >> is what we're seeing with bob's discount. we have a pe higher and a pe seller. if you're spot to get more value of the company go what is amitav you sell it to another pe firm? and is just that we cannot do better than this, so someone else might be able to? they will answer differently than the previous owner, but there is a cycle for private equity quest -- cash to have to return that money to investors. here, wejustin is should talk about at least one big notable tech deal of the year, which is silver lake and dell. that was excruciating. >> that was the deal of the
year, ataturk most of the year to do. loberg broke the story in january but that dell was in the talks with company president. later that it was silver lake, and it closed in october. it took most of the air, and it was a 25 billion dollar deal. we saw activists come in and out left and right. a drama deal, and a big headline number. do you see smaller companies that take about being acquired by one of these bigger ones who were there public, whether they d.c. that is part of a startup strategy, or is it just too late in the game to even go that far? >> it is hard of their strategy. innovation has been de facto to into acquisition. start of culture into more -- >> we see some of the stack try
just aren't these innovation labs, ibm is one of note, and whether you say this by default or not, they're certainly looking for a younger, hotter, smaller companies they can buy because they know they cannot grow it in-house. >> ¢ has been acquiring once a great hardware companies. -- gave into new york. that is helping them read the future of shopping. it is the types of companies that are a fit for acquiring innovation. culture clash,ee which is a big problem even within tech companies. there's a lot the questions about tumblr, which was acquired by yahoo! but if it can keep its edgy factor. in effect you, we talked about these notable deals, hilton also has to be up there. >> that is the exit of the year,
i would say. it was almost a deal left for dead in 2009, markdown 70%. but blackstone would not let that yield go -- deal go. >> that was the most cash that blackstone has ever put into a deal. >> it was, so they really did of tagline tosort be attached to a busted deal. -- ister child is done better when it is done in a good sense. >> the profit is $10 billion to 2.5 times on their money. it is extraordinary. >> what are your sources telling you about next year? >> we're been talking to analysts and private equity executives. people are looking for private equity m&a's to really pick up next year, they went an little slow this year. it was interesting after dell,
people thought that would be a harbinger of private equity to really pick up, and the number was down seven percent this year. so people are thinking with the fed is tapering and with other peaks coming back down that alley is for companies will come firmsown, private equity will have more confidence to buy in the u.s., overly at better prices for them. that said, in europe, comedies and banks are more willing to sell with some of those valuations creeping up. they're more willing to take those prices, and in asia, the slowdown in china has been sort of a source for bargains for a lot of firms raising money there. blackstone, kkr, they have all china.a lot of money in >> it does seem like a jazz going to be hot. thank you very much. asia is going to be hot.
with early-stage investing. do angel investors have to be more patient than capital investors? >> i do not know of is more patient than i just think they have different goals and different timelines. most agents will tell you that they are looking for a single a figure x it. they are looking to get two to three in two to four years. >> so it is smaller money, and quicker money for in theory. >> liquidity, yes. large investors say that lemon rots quicker than rile's writing -- apple pens. >> you hear it in the vermont up her doors complaining that instead of just having to deal
with angels and super ages, they know how to deal with more and for the season to water in vc'ser -- more and more that want in earlier? 98% oftruth is 95%, companies do not need venture dollars. angels make a lot more sense. know, it is not on the west coast was not in the east coast it is in ohio. everyone thinks of -- no one would think of ohio as big an angel. eyes, but there are some pretty impressive physics. >> they have had internal return return.59% rate of
feel off the area to contain it. he sat down with a dachshund for a list of energy with peter cook. >> this is a different job, it is our job to make sure that the markets work for the american public. not worke markets do in finance, and the six percent just work in wall time. to createjob transparent in a market that failed americans in 2008. six days have been approved for testing for unmanned aircraft. there's ambiguity right on
the regulations. there is no regulation concerning the operation of a commercial drone or aircraft system. that is of the above the faa has been tasked with helping over the next few years. that goes well beyond the aviation issues that apa best that the faa is grappling with that test sites. property and air rights, what can you do in the airspace that is privately owned in your backyard? commercially exploit the -- is it like mineral rights? >>, it will work together to help in car entertainment and information systems, according to the wall street journal. this is usually based on androids software. speaking of tech, it is was one area that garnered a lot of attention for activist investors this year. carl icahn, dan long, david einhorn, just a few of the names
that made headlines. activist experts and attorney risk davis is with me now. he is a partner at kleinberg capital, he is also chair of the firm's investment -- activist investments. chris, great to see you. this has been an insane year, as far as active as investing goes. what stands out to you most? >> it was a year with a lot of fake activist matters, and a lot of egg names. but it was also a year where there were essentially 100 strains of acquisition with intoist raking down walls new areas. in addition to the traditional, such as carl icahn pushing for even larger shareholder share repurchase at apple, you're seeing an expansion. you're seeing management influence like were seed omar is -- where steve ballmer is a eased out of marker soft -- being eased out of microsoft. >> just in case you're confused,
and you do not know how powerful one percent to be, there is your answer. >> exactly. change, auge small country can have a lot of influence, you can see that not only in the market, but you can see mary jo white at the sec race that. she gave a shout out to encourages -- to activists that have been encouraging them to work on this. >> they're trying to unlock value for the average investor. i know you have strong opinions on this amount -- on this, what do you make of this? >> kind of in the world of startups it is all about who has what's on the table. it becomes this whole battle around the class of shares, and a lot of people feel that they are on the board to represent the class of shares they invested. minority
company thatnto a is worth $20 million committed will be hard to get your voice heard. >> you really should not assume that a big company is owing to move because one percent investors say something. it is when they have an idea that resonates with the larger investors by the institutional investors. that is when the board hears about it. even the most entrenched can do one thing, which is counted. when they hear their shareholder base come to them and say, whether does behind the scenes and we do not see it, or it is happy for us, that is a good idea and we should do something about it, that is when it will happen. >> activist investors are hoping the board, because one cliché about words is that often they are appointed by more -- too cozy, too is
friendly, myopic. there is this kind of positive take away from it, right? >> hugely important, and under focused on what especially in smaller companies. when these stars become public, but stay small for a while, it does not have the access to the quality of directors that a bigger company has. when an activist can come in and address the idea that you're getting to before, of getting the right talent to the right decision making, one of the ways of doing that is having the activist. they want to make money just like the people in management and on the board do. they can help the situation. >> what do you see for the next year? there are a lot of tech companies with talent -- cash on the balance sheet. bigger than a hedge fund, why did i not do something with it, why did i not give something back? >> you will see trends continue, you'll see more money come into the activist ross funds -- activist funds.
you -- you'llede continue to seize and lost, people who were already established funds who are now people that came out of i big funds and made it her own name and made a pretty successfully. you will see constructivist activist like you did at dq at the west coast where he works with companies to change things. i think you'll continue to see an operational cup between hedge funds and institutional investors, like you saw this year with those that work partisan that got a non- proposal. >> whatever's going to happen is going to happen faster. >> it will come down to
accountability, because we live in a strange country. ceos are less accountable than football coaches who will get fired at the end of the year. we need to hold them to that standard. >> thank you so much. he is head of the firm investor activating and m&a practices. what it means for the tech community on the west coast come and we will talk about that here on the east coast. ♪
with me this hour. bob, what is your take? i'm going to guess that you think twitter is overvalued, but that is just a guess. >> you know me too well. this looks like a continuing trend that has been going for some time. as much as i hate to say, you really begin to feel like it is 2000 all over again. >> it is worth noting that you were one of the people that suffer groupon they should've taken the first bow on it -- i out offer. the stock really has shown it to be right. >> if you look at anything like a normal valuation, we had just kind of explodes. they had hoped to have earnings into -- 2013 blake shelton hatted 2013. they have approximately equal enterprise values. how do you get there? -- let's say you
got an offer right now, saying they need to pay $10 a month for all of the journalist that i follow that have to do with the financial world go what if they create revenue models that are different, does that change or perspective? >> that does not change matters -- perfect above the risk reward relationship they are investing in today. they might think of a bunch of things, they might not go obsolete before everyone abandons them. but how can you look at a $45 billion valuation in the face? maybe they will think of something that they can make money with? it is really out of control. >> i member the last time you're on with me, we had one very clear blogger's perspective which was a complete waste of time. what do you think about twitter? howard, funny about
someone bob and i both know, i think as a product i would pay for it. >> if you're willing to pay for it, maybe there's something to be said for it. >> i would not pay for facebook is much as i would pay for twitter. >> there was a study published earlier from the university in london saying that as far as u.k. teens go facebook is dead. that was the title of the report. is taking off like a rocket, which is why they got a huge valuation. it is very hard to think back to any of these acquisitions, or any of the ipo companies in the social media space that i make in -- that have made enough money to justify the about the market said they were worth. >> you're still a believer is netjets -- shpnapchat?
it forink it allows spontaneity and spontaneous communication, but just this past holiday, a guy named shane me tweet thate i favored it. advertising being beautiful and personalized. snap chat is a way to make that dutiful about highly personal, highly relevant ads. >> i guess i would say that i agree, but what i would say is that a lot of times people confuse the power of what the internet can do with the power of what it did do a company could do. because i particular country is exploding -- a particular company is exploiting a certain function, it does not mean that it controls those functions.
1990's they invented push technology, and integrated it into screensavers. and they got offered a lot of money, and entered it down because they're going to go longer your world, and were never heard from again. it is cool that the internet will allow you to do this, and you have captured some first mover, but if the first mover does not lead eventually to a sustainable business model, it is not worth paying for. >> we have a quick break today, more in just two minutes on the sharing economy. ♪
bob rice and justin with me. i do not want to put together my ikea furniture, i do not have time to do this aaron, i just get on and basically hire somebody to do these chores that i do not want to do. it shows how a role -- how are whole country is changing. >> the good side of task rabbit whohat somebody once -- wants to make some money, they can do it without having a lot of problems. bigger companies are hiring less personnel. that is the good side of task rabbit, it is a great thing, but it does really illustrate how -- how the economy is segregating into skilled jobs and non-skilled jobs in a scary way. >> justin, how do you see a
that? b&b, carter met his air hotels.com, the callista getting pretty long -- the list is getting pretty long. >> if you look in the perspective of large corporation, it is easy to take bob's view. airbnb, putting your car on get around, it is all into discretionary spending, it is much easier to do airbnb. it allows people to enrich their lives a little more. >> i think all of that is true. i think what is interesting is that as a signaling in some respects the slow lowering of this expected standard of living for an awful lot of people. college kids are graduating without lot of that green jobs with lots of debt, and they're trying to find good ways to cope. you can share cars, you can
share snowblowers, you do not have to buy them. it is fantastic for the government is not great for the overall economy. it is pretty strongly deflationary because you are really seeing the need to acquire consumer goods fall. this is not a joke about think you will surely -- see it show up in a big way over the next three to five years. city,ht, if you are in a why would you want to deal with the hassle of a car? i've noticed other companies, alamo, hearst, their time to , they arehertz trying to adjust. allows sharing, and sharing allows a cheaper cost of living. >> final thoughts in just a moment. justin and bob back with me in just a few minutes. ♪
>> final thoughts from my guest justin and bob. when a 14, what are we going to see -- 2014, what are we going to see? >> this is the year of 3-d printing. -- 4-dprinting, printing, that is time. that my ikea mean furniture would assemble itself. i would cry tears of joy. >> then people would lose their task rabbit jobs. >> what do you see? >> everyone is talking about the internet of things quite a bit, and everything is going to be
online. the fact of the matter is that technology is moving at such that such a pace that has already. over 15 billion things on the web, and 60 million collections. rfid, anything that enables a thing to be online will be super relevant to everybody and technology. >> thank you so much. always., thank you as the hour,inutes past that means it is time for bloomberg on the markets to get you out of the newsroom. we will show you first hear what is going on. the dow and the s&p 500 and the nasdaq are all higher across the board. very close to the end of this trading year. 25%.00 up around
paradoxes, two of the poorest counties in the nation, and also the place for the wealthy to shield their money from uncle sam. why are so many people wanting an address in south got up -- da kota? >> there are ways you can use the laws of south dakota to avoid taxes. this is only works if you have millions and millions of dollars. you can set up a trust in that they date to avoid the taxes -- in that stage to avoid the taxes. creation program for south dakota, they want to create jobs for local law firms, banks, and accounting firms i having the work of setting up those trusts in south dakota as opposed to some other state. andf rich people like it,
local law-enforcement like you, who does not? >> president obama. he has proposed legislation to close one of the loopholes that people use stealth -- for south dakota trusts to shield the money from taxes. possibilityd -- any of a wild card here? obama'ses not seem like proposal has any chance of happening times it -- any time soon. >> thank you very much. we are on the markets again for you in 30 minutes. street smart is up next. ♪ >> welcome to the most important hour of the session. we are scouring every market for
your last trade of the day and your first trade for tomorrow. inie hyman and i are filling for trish and adam today. >> yes, we are. >> it is a penalty for you -- penultimate is a great word. that's take a look at the big two. let's start with the snp here. down for the day, a little bit of fluctuation but we have been positive most of the day. we are on track for the best year since 1997. ,aybe taking a little breather could be there are not a lot of people trading today in equities. some people may just be taking the day off. year, look at the 10 peaked over three percent early this morning. right now trading at 2.97.